The government’s proposed system of personal accounts must be developed further through higher contribution levels if the national pensions savings scheme is to ensure employees have adequate savings on retirement, delegates were told at the Employee Benefits Summit in Jerez.
Sir John Butterfill MP, chairman of the All Parliamentary Group – Occupational Pensions, told delegates that personal accounts were a solid foundation to help solve the pensions crisis, but were not the final solution to increase employees’ long-term savings. He also suggested that employers should receive an incentive in the form of tax relief on corporation tax to make higher pension contributions.
“Personally I believe that the system of personal accounts is a good start, but it is not enough and it is and it has to be built upon,” he said.
He added that one way in which the system could be developed is by increasing the proposed minimum combined contribution rates 8% to the personal accounts which are due to come into effect in 2012.
“A contribution rate of 8% is wholly inadequate, and is simply not enough in terms of retirement savings,” he added.
This sentiment was echoed by over half (54%) of the delegates who attended the session who voted that more than 15% of salary was a suitable contribution level to produce a pension for employees.
Just 2% said that between 6% and 10% was a suitable level of contribution rate, while 4% believed that between 11% and would suffice.